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Ciena Reports Fiscal Fourth Quarter 2016 and Year-End Financial Results

HANOVER, Md.--(BUSINESS WIRE)--Dec. 8, 2016-- Ciena® Corporation (NYSE: CIEN), the network specialist, today announced unaudited financial results for its fiscal fourth quarter and year ended October 31, 2016.

For the fiscal fourth quarter 2016, Ciena reported revenue of $716.2 million as compared to $692.0 million for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena reported revenue of $2.6 billion, as compared to $2.4 billion for fiscal year 2015.

On the basis of generally accepted accounting principles (GAAP), Ciena's net income for the fiscal fourth quarter 2016 was $36.6 million, or $0.25 per diluted common share, which compares to a GAAP net loss of $13.8 million, or $0.10 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena had a GAAP net income of $72.6 million, or $0.51 per diluted common share, which compares to a GAAP net income of $11.7 million or $0.10 per diluted common share for fiscal year 2015.

Ciena's adjusted (non-GAAP) net income for the fiscal fourth quarter 2016 was $69.4 million, or $0.44 per diluted common share, which compares to an adjusted (non-GAAP) net income of $67.3 million, or $0.42 per diluted common share, for the fiscal fourth quarter 2015. For fiscal year 2016, Ciena's adjusted (non-GAAP) net income was $214.6 million, or $1.38 per diluted common share, as compared to an adjusted (non-GAAP) net income of $179.0 million, or $1.31 per diluted common share for fiscal year 2015.

“Our strong fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena's seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow,” said Gary Smith, president and CEO, Ciena. “We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017.”

Fiscal Fourth Quarter 2016 Performance Summary

The tables below (in millions, except percentage data) provide comparisons of certain quarterly results to prior periods, including sequential quarterly and year over year changes. A reconciliation between the GAAP and adjusted (non-GAAP) measures contained in this release is included in Appendices A and B.

 
GAAP Results (unaudited)
Q4   Q3   Q4   Period Change
FY 2016 FY 2016 FY 2015 Q-T-Q*   Y-T-Y*
Revenue $ 716.2 $ 670.6 $ 692.0 6.8 % 3.5 %
Gross margin 44.5 % 46.0 % 43.8 % (1.5 )% 0.7 %
Operating expense $ 258.9 $ 251.5 $ 293.6 2.9 % (11.8 )%
Operating margin 8.3 % 8.5 % 1.4 % (0.2 )% 6.9 %
 
Non-GAAP Results (unaudited)
Q4 Q3 Q4 Period Change
FY 2016 FY 2016 FY 2015 Q-T-Q* Y-T-Y*
Revenue $ 716.2 $ 670.6 $ 692.0 6.8 % 3.5 %
Adj. gross margin 45.2 % 46.8 % 44.9 % (1.6 )% 0.3 %
Adj. operating expense $ 232.4 $ 223.4 $ 220.5 4.0 % 5.4 %
Adj. operating margin 12.8 % 13.5 % 13.0 % (0.7 )% (0.2 )%
 

* Denotes % change, or in the case of margin, absolute change

 
 
Revenue by Segment (unaudited)
Q4 FY 2016   Q3 FY 2016   Q4 FY 2015
Revenue   % Revenue   % Revenue   %
Networking Platforms
Converged Packet Optical $ 488.0 68.1 $ 467.6 69.7 $ 484.3 70.0
Packet Networking 72.4 10.1 63.7 9.5 63.7 9.2
Optical Transport   5.8 0.8   9.6 1.4   16.7 2.4
Total Networking Platforms 566.2 79.0 540.9 80.6 564.7 81.6
 
Software and Software-Related Services
Software Platforms 16.3 2.3 12.6 1.9 9.6 1.4
Software-Related Services   21.3 3.0   19.0 2.8   16.7 2.4
Total Software and Software-Related Services 37.6 5.3 31.6 4.7 26.3 3.8
 
Global Services
Maintenance Support and Training 59.8 8.3 56.0 8.4 57.2 8.3
Installation and Deployment 38.6 5.4 31.2 4.7 33.5 4.8
Consulting and Network Design   14.0 2.0   10.9 1.6   10.3 1.5
Total Global Services 112.4 15.7 98.1 14.7 101.0 14.6
           
Total $ 716.2 100.0 $ 670.6 100.0 $ 692.0 100.0
 
 

Additional Performance Metrics for Fiscal Fourth Quarter 2016

 
  Revenue by Geographic Region (unaudited)
Q4 FY 2016   Q3 FY 2016   Q4 FY 2015
Revenue   % Revenue   % Revenue   %
North America $ 463.1 64.7 $ 438.0 65.3 $ 480.0 69.4
Europe, Middle East and Africa 112.5 15.7 104.3 15.6 94.0 13.6
Caribbean and Latin America 46.8 6.5 46.6 6.9 45.7 6.6
Asia Pacific   93.8 13.1   81.7 12.2   72.3 10.4
Total $ 716.2 100.0 $ 670.6 100.0 $ 692.0 100.0
 
  • U.S. customers contributed 61% of total revenue
  • One 10%-plus customer represented a total of 18.3% of revenue
  • Cash and investments totaled $1.14 billion
  • Cash flow from operations totaled $136.7 million
  • Average days' sales outstanding (DSOs) were 72
  • Accounts receivable balance was $576.2 million
  • Inventories totaled $211.3 million, including:
    • Raw materials: $44.6 million
    • Work in process: $12.9 million
    • Finished goods: $156.4 million
    • Deferred cost of sales: $59.9 million
    • Reserve for excess and obsolescence: $(62.5) million
  • Product inventory turns were 6.1
  • Headcount totaled 5,555

Business Outlook for Fiscal First Quarter 2017

Statements relating to business outlook are forward-looking in nature and actual results may differ materially. These statements should be read in the context of the Notes to Investors below.

Ciena expects financial performance for fiscal first quarter 2017 to include:

  • Revenue in the range of $615 million to $645 million
  • Adjusted (non-GAAP) gross margin in the mid-40s percentage range
  • Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million

Live Web Broadcast of Unaudited Fiscal Fourth Quarter 2016 Results

Ciena will host a discussion of its unaudited fiscal fourth quarter 2016 results with investors and financial analysts today, Thursday, December 8, 2016 at 8:30 a.m. (Eastern). The live broadcast will be available at www.ciena.com, and an archived replay will be available shortly following the conclusion of the live broadcast on the Investor Relations page of Ciena's website at www.ciena.com/investors. Ciena will also post to the Investor Relations page a presentation that includes certain highlighted information discussed on the call and certain historical results of operations.

Notes to Investors

Forward-Looking Statements. You are encouraged to review the Investors section of our website, where we routinely post press releases, SEC filings, recent news, financial results, supplemental financial information, and other announcements. From time to time we exclusively post material information to this website along with other disclosure channels that we use. This press release contains certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts, assumptions and other information available to the Company as of the date hereof. Forward-looking statements include statements regarding Ciena's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would" or similar words. Forward-looking statements in this release include: "Our strong fiscal 2016 results demonstrate our increasingly differentiated performance versus our competitors, marking Ciena's seventh consecutive year of growing faster than the overall market as well as steady improvement in our operating leverage, profitability and cash flow."; "We believe that the combination of our leading technology, strategic investments, global scale and business diversification will enable us to continue to take market share and drive operating leverage in fiscal 2017." "Ciena expects fiscal first quarter 2017 financial performance to include: Revenue in the range of $615 million to $645 million; Adjusted (non-GAAP) gross margin in the mid-40s percentage range; Adjusted (non-GAAP) operating expense in the range of $220 million to $225 million."

Ciena's actual results, performance or events may differ materially from these forward-looking statements made or implied due to a number of risks and uncertainties relating to Ciena's business, including: the effect of broader economic and market conditions on our customers and their business; changes in network spending or network strategy by large communication service providers; seasonality and the timing and size of customer orders, including our ability to recognize revenue relating to such sales; the level of competitive pressure we encounter; the product, customer and geographic mix of sales within the period; supply chain disruptions and the level of success relating to efforts to optimize Ciena's operations; changes in foreign currency exchange rates affecting revenue and operating expense; and the other risk factors disclosed in Ciena's Report on Form 10-Q, which Ciena filed with the Securities and Exchange Commission on September 7, 2016. Ciena assumes no obligation to update any forward-looking information included in this press release.

Non-GAAP Presentation of Quarterly Results. This release includes non-GAAP measures of Ciena's gross profit, operating expense, income from operations, net income (loss) and net income (loss) per share. In evaluating the operating performance of Ciena's business, management excludes certain charges and credits that are required by GAAP. These items share one or more of the following characteristics: they are unusual and Ciena does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of Ciena's control. Management believes that the non-GAAP measures below provide management and investors useful information and meaningful insight to the operating performance of the business. The presentation of these non-GAAP financial measures should be considered in addition to Ciena's GAAP results and these measures are not intended to be a substitute for the financial information prepared and presented in accordance with GAAP. Ciena's non-GAAP measures and the related adjustments may differ from non-GAAP measures used by other companies and should only be used to evaluate Ciena's results of operations in conjunction with our corresponding GAAP results. Adjustments made in calculating Adjusted (non-GAAP) net income do not result in any incremental income tax due to the availability of Ciena's deferred tax assets which would offset any additional income. As such, the tax effect of these adjustments is not presented as a separate reconciling item. To the extent not previously disclosed in a prior Ciena financial results press release, Appendix A to this press release sets forth a complete GAAP to non-GAAP reconciliation of the non-GAAP measures contained in this release.

With respect to Ciena’s expectations under “Business Outlook for Fiscal First Quarter 2017” above, Ciena is not able to provide a quantitative reconciliation of the adjusted (non-GAAP) gross margin and adjusted (non-GAAP) operating expense guidance measures to the corresponding gross profit and gross profit percentage, and operating expense GAAP measures without unreasonable efforts. Ciena cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, Ciena is unable to address the probable significance of the unavailable information.

About Ciena. Ciena (NYSE: CIEN) is a network strategy and technology company. We translate best-in-class technology into value through a high-touch, consultative business model - with a relentless drive to create exceptional experiences measured by outcomes. For updates on Ciena, follow us on Twitter @Ciena, LinkedIn, the Ciena Insights blog, or visit www.ciena.com.

 

CIENA CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 
  Quarter Ended October 31,   Year Ended October 31,
2016   2015 2016   2015
Revenue:
Products $ 582,455 $ 574,281 $ 2,117,472 $ 2,002,395
Services   133,736     117,692     483,101     443,274  
Total revenue   716,191     691,973     2,600,573     2,445,669  
Cost of goods sold:
Products 324,663 323,090 1,176,304 1,120,373
Services   72,980     65,895     262,693     249,733  
Total cost of goods sold   397,643     388,985     1,438,997     1,370,106  
Gross profit   318,548     302,988     1,161,576     1,075,563  
Operating expenses:
Research and development 112,448 107,859 451,794 414,201
Selling and marketing 96,853 93,003 349,731 333,836
General and administrative 32,147 33,804 132,828 123,402
Amortization of intangible assets 14,551 36,454 61,508 69,511
Acquisition and integration costs 22,084 4,613 25,539
Restructuring costs   2,876     366     4,933     8,626  
Total operating expenses   258,875     293,570     1,005,407     975,115  
Income from operations 59,673 9,418 156,169 100,448
Interest and other income (loss), net (1,339 ) (6,232 ) (12,795 ) (25,505 )
Interest expense   (15,371 )   (12,688 )   (56,656 )   (51,179 )
Income (loss) before income taxes 42,963 (9,502 ) 86,718 23,764
Provision for income taxes   6,376     4,330     14,134     12,097  
Net income (loss) $ 36,587   $ (13,832 ) $ 72,584   $ 11,667  
 
Net Income (loss) per Common Share
Basic net income (loss) per common share $ 0.26   $ (0.10 ) $ 0.52   $ 0.10  
Diluted net income (loss) per potential common share1 $ 0.25   $ (0.10 ) $ 0.51   $ 0.10  
 
Weighted average basic common shares outstanding   139,741     134,097     138,312     118,416  
Weighted average diluted potential common shares outstanding 2   165,298     134,097     150,704     120,101  
 
1. The calculation of GAAP diluted net income per common share for the fourth quarter of fiscal 2016 requires adding back interest expense of approximately $0.7 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 and approximately $3.6 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018 to the GAAP net income in order to derive the numerator for the diluted earnings per common share calculation.
 
The calculation of GAAP diluted net income per common share for fiscal 2016 requires adding back interest expense of approximately $4.8 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017 to the GAAP net income in order to derive the numerator for the diluted earnings per common share calculation.
 
2. Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for the fourth quarter of fiscal 2016 includes 1.6 million shares underlying certain stock options and restricted stock units, 6.6 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017 and 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018.
 
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for fiscal 2016 includes 1.3 million shares underlying certain stock options and restricted stock units and 11.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017.
 
Weighted average dilutive potential common shares outstanding used in calculating GAAP diluted net income per common share for fiscal 2015 includes 1.7 million shares underlying certain stock options and restricted stock units.
 
 

CIENA CORPORATION

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 
  October 31,
2016   2015
ASSETS  
Current assets:
Cash and cash equivalents $ 777,615 $ 790,971
Short-term investments 275,248 135,107
Accounts receivable, net 576,235 550,792
Inventories 211,251 191,162
Prepaid expenses and other   172,843     196,178  
Total current assets 2,013,192 1,864,210
Long-term investments 90,172 95,105
Equipment, building, furniture and fixtures, net 288,406 191,973
Goodwill, net 266,974 256,434
Other intangible assets, net 146,711 202,673
Other long-term assets   76,987     84,656  
Total assets $ 2,882,442   $ 2,695,051  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 235,942 $ 222,140
Accrued liabilities and other short-term obligations 310,353 316,283
Deferred revenue 109,009 126,111
Current portion of long-term debt   236,558     2,500  
Total current liabilities 891,862 667,034
Long-term deferred revenue 73,854 62,962
Other long-term obligations 124,394 72,540
Long-term debt, net   1,025,991     1,271,639  
Total liabilities $ 2,116,101   $ 2,074,175  
 
Stockholders’ equity (deficit):
Preferred stock — par value $0.01; 20,000,000 shares authorized; zero shares issued and outstanding
Common stock — par value $0.01; 290,000,000 shares authorized; 139,767,627 and 135,612,217 shares issued and outstanding 1,398 1,356
Additional paid-in capital 6,715,478 6,640,436
Accumulated other comprehensive loss (24,329 ) (22,126 )
Accumulated deficit   (5,926,206 )   (5,998,790 )
Total stockholders’ equity   766,341     620,876  
Total liabilities and stockholders’ equity $ 2,882,442   $ 2,695,051  
 
 

CIENA CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
  Year Ended October 31,
2016   2015
Cash flows from operating activities:  
Net income $ 72,584 $ 11,667
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of equipment, furniture and fixtures, and amortization of leasehold improvements 63,394 55,901
Share-based compensation costs 51,993 55,340
Amortization of intangible assets 78,298 79,866
Provision for inventory excess and obsolescence 33,713 26,846
Provision for warranty 15,483 17,881
Other 25,514 27,373
Changes in assets and liabilities:
Accounts receivable (26,074 ) (37,297 )
Inventories (53,000 ) 46,898
Prepaid expenses and other 30,047 (46,383 )
Accounts payable, accruals and other obligations 7,153 (10,505 )
Deferred revenue   (9,585 )     34,525  
Net cash provided by operating activities   289,520       262,112  
Cash flows used in investing activities:
Payments for equipment, furniture, fixtures and intellectual property (107,185 ) (62,109 )
Restricted cash 11 (40 )
Purchase of available for sale securities (365,191 ) (245,323 )
Proceeds from maturities of available for sale securities 230,612 205,000
Settlement of foreign currency forward contracts, net (18,506 ) 24,133
Purchase of cost method investment (4,000 ) (2,000 )
Acquisition of business, net of cash acquired   (32,000 )     37,212  
Net cash used in investing activities   (296,259 )     (43,127 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net 248,750
Payment of long-term debt (266,116 ) (29,867 )
Payment of debt and equity issuance costs (3,987 ) (421 )
Payment of capital lease obligations (5,966 ) (8,038 )
Proceeds from issuance of common stock   23,091       30,275  
Net cash used in financing activities   (4,228 )     (8,051 )
Effect of exchange rate changes on cash and cash equivalents   (2,389 )     (6,683 )
Net increase in cash and cash equivalents (13,356 ) 204,251
Cash and cash equivalents at beginning of fiscal year   790,971       586,720  
Cash and cash equivalents at end of fiscal year $ 777,615     $ 790,971  
Supplemental disclosure of cash flow information
Cash paid during the fiscal year for interest $ 46,897 $ 40,772
Cash paid during the fiscal year for income taxes, net $ 15,268 $ 10,668
Non-cash investing and financing activities
Purchase of equipment in accounts payable $ 15,030 $ 20,922
Equipment acquired under capital leases $ 5,322 $ 464
Building subject to capital lease $ 8,993 $ 14,939
Construction in progress subject to build-to-suit lease $ 39,914 $ 18,663
Non-cash financing activities
Conversion of 4.0% convertible senior notes, due March 15, 2015 into 8,898,387 shares of common stock $ $ 180,645
Conversion of 8.0% convertible senior notes, due December 15, 2019, assumed from the Cyan acquisition, into 4,589,626 shares of common stock $ $ 117,140
Fair value of shares issued related to acquisition of business $ $ 302,114
 
 
APPENDIX A - Reconciliation of Adjusted (Non- GAAP) Quarterly Measurements (unaudited)
 
 

Quarter Ended
October 31,

2016   2015
Gross Profit Reconciliation (GAAP/non-GAAP)  
GAAP gross profit $ 318,548     $ 302,988  
Share-based compensation-products 612 589
Share-based compensation-services 557 573
Amortization of intangible assets 4,320 3,438
Fair value adjustment of acquired inventory         3,069  
Total adjustments related to gross profit   5,489       7,669  
Adjusted (non-GAAP) gross profit $ 324,037     $ 310,657  
Adjusted (non-GAAP) gross profit percentage 45.2 % 44.9 %
 
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense $ 258,875     $ 293,570  
Share-based compensation-research and development 3,172 3,850
Share-based compensation-sales and marketing 2,890 4,468
Share-based compensation-general and administrative 2,961 5,860
Share-based compensation-acquisition and integration 7,588
Amortization of intangible assets 14,551 36,454
Acquisition and integration costs, excluding share-based compensation 14,496
Restructuring costs   2,876       366  
Total adjustments related to operating expense   26,450       73,082  
Adjusted (non-GAAP) operating expense $ 232,425     $ 220,488  
 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations $ 59,673     $ 9,418  
Total adjustments related to gross profit 5,489 7,669
Total adjustments related to operating expense   26,450       73,082  
Adjusted (non-GAAP) income from operations   91,612     $ 90,169  
Adjusted (non-GAAP) operating margin percentage 12.8 % 13.0 %
 
Net Income Reconciliation (GAAP/non-GAAP)
GAAP net income (loss) $ 36,587     $ (13,832 )
Total adjustments related to gross profit 5,489 7,669
Total adjustments related to operating expense 26,450 73,082
Loss on extinguishment of debt 376
Non-cash interest expense   500       362  
Adjusted (non-GAAP) net income $ 69,402     $ 67,281  
 
Weighted average basic common shares outstanding   139,741       134,097  
Weighted average dilutive potential common shares outstanding1   174,496       177,054  
 
Net Income (Loss) per Common Share
GAAP diluted net income (loss) per common share $ 0.25 $ (0.10 )
Adjusted (non-GAAP) diluted net income per common share2 $ 0.44 $ 0.42
 
 
APPENDIX B - Reconciliation of Adjusted (Non- GAAP) Annual Measurements (unaudited)
 
 

Year Ended
October 31,

2016   2015
Gross Profit Reconciliation (GAAP/non-GAAP)
GAAP gross profit $ 1,161,576   $ 1,075,563  
Share-based compensation-products 2,457 2,400
Share-based compensation-services 2,479 2,156
Amortization of intangible assets 16,401 10,039
Fair value adjustment of acquired inventory       3,069  
Total adjustments related to gross profit   21,337     17,664  
Adjusted (non-GAAP) gross profit $ 1,182,913   $ 1,093,227  
Adjusted (non-GAAP) gross profit percentage 45.5 % 44.7 %
 
Operating Expense Reconciliation (GAAP/non-GAAP)
GAAP operating expense $ 1,005,407   $ 975,115  
Share-based compensation-research and development 13,870 10,665
Share-based compensation-sales and marketing 15,138 15,539
Share-based compensation-general and administrative 17,342 17,018
Share-based compensation-acquisition and integration 714 7,588
Amortization of intangible assets 61,508 69,511
Acquisition and integration costs, excluding share-based compensation 3,899 17,951
Restructuring costs 4,933 8,626
Settlement of patent litigation   1,200     500  
Total adjustments related to operating expense   118,604     147,398  
Adjusted (non-GAAP) operating expense $ 886,803   $ 827,717  
 
Income from Operations Reconciliation (GAAP/non-GAAP)
GAAP income from operations $ 156,169   $ 100,448  
Total adjustments related to gross profit 21,337 17,664
Total adjustments related to operating expense   118,604     147,398  
Adjusted (non-GAAP) income from operations $ 296,110   $ 265,510  
Adjusted (non-GAAP) operating margin percentage 11.4 % 10.9 %
 
Income Reconciliation (GAAP/non-GAAP)
GAAP net income $ 72,584   $ 11,667  
Total adjustments related to gross profit 21,337 17,664
Total adjustments related to operating expense 118,604 147,398
Loss on extinguishment of debt 226
Non-cash expense associated with the conversion of convertible notes 768
Non-cash interest expense   1,881     1,491  
Adjusted (non-GAAP) net income $ 214,632   $ 178,988  
 
Weighted average basic common shares outstanding   138,312     118,416  
Weighted average dilutive potential common shares outstanding3   177,258     163,308  
 
Net Income per Common Share
GAAP diluted net income per common share $ 0.51 $ 0.10
Adjusted (non-GAAP) diluted net income per common share4 $ 1.38 $ 1.31
 
1. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2016 includes 1.6 million shares underlying certain stock options and restricted stock units, 6.6 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018 and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2015 includes 2.7 million shares underlying certain stock options and restricted stock units, 13.0 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018, 0.7 million shares underlying the 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
2. The calculation of Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2016 requires adding back interest expense of approximately $0.7 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $3.6 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018 and approximately $2.9 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.
 
The calculation of Adjusted (non-GAAP) diluted net income per common share for the fourth quarter of fiscal 2015 requires adding back interest expense of approximately $1.4 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $3.6 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018, approximately $0.1 million associated with Ciena's 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and approximately $2.8 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.
 
3. Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for fiscal 2016 includes 1.3 million shares underlying certain stock options and restricted stock units, 11.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018 and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
Weighted average dilutive potential common shares outstanding used in calculating Adjusted (non-GAAP) diluted net income per common share for fiscal 2015 includes 1.7 million shares underlying certain stock options and restricted stock units, 3.4 million shares underlying Ciena's 4.0% convertible senior notes (which were paid at maturity during the second quarter of fiscal 2015), 13.1 million shares underlying Ciena's 0.875% convertible senior notes, due June 15, 2017, 17.4 million shares underlying Ciena's 3.75% convertible senior notes, due October 15, 2018, 0.2 million shares underlying Ciena's 8.0% convertible senior notes assumed from the Cyan acquisition, due December 15, 2019, and 9.2 million shares underlying Ciena's 4.0% convertible senior notes, due December 15, 2020.
 
4. The calculation of Adjusted (non-GAAP) diluted net income per common share for fiscal 2016 requires adding back interest expense of approximately $4.8 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $14.3 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018 and approximately $11.4 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.
 
The calculation of Adjusted (non-GAAP) diluted net income per common share for fiscal 2015 requires adding back interest expense of approximately $3.2 million approximately associated with Ciena's 4.0% convertible senior notes (which were paid at maturity during the second quarter of fiscal 2015), approximately $5.5 million associated with Ciena's 0.875% convertible senior notes, due June 15, 2017, approximately $14.3 million associated with Ciena's 3.75% convertible senior notes, due October 15, 2018, approximately $0.1 million associated with Ciena's 8.0% convertible senior notes, due December 15, 2019 assumed from the Cyan acquisition and approximately $11.4 million associated with Ciena's 4.0% convertible senior notes, due December 15, 2020 to the Adjusted (non-GAAP) net income in order to derive the numerator for the Adjusted earnings per common share calculation.
 

The adjusted (non-GAAP) measures above and their reconciliation to Ciena's GAAP results for the periods presented reflect adjustments relating to the following items:

  • Share-based compensation expense - a non-cash expense incurred in accordance with share-based compensation accounting guidance.
  • Acquisition and integration costs - consist of financial, legal and accounting advisors, facilities and systems consolidation costs, and severance and other employment-related costs related to our recent acquisitions of Cyan and TeraXion. Ciena does not believe that these costs are reflective of its ongoing operating expense following its completion of these integration activities.
  • Amortization of intangible assets - a non-cash expense arising from the acquisition of intangible assets, principally developed technologies and customer-related intangibles, that Ciena is required to amortize over the expected useful life.
  • Fair value adjustment of acquired inventory - an infrequent charge required by acquisition accounting rules resulting from the required revaluation of inventory acquired from Cyan to estimated fair value. This revaluation resulted in a net increase in inventory carrying value and an increase in cost of goods sold for the period indicated.
  • Restructuring costs - costs incurred as a result of restructuring activities taken to align resources with perceived market opportunities.
  • Settlement of patent litigation - included in general and administrative expense is a $1.2 million patent litigation settlement during the second quarter of fiscal 2016 and a $0.5 million patent litigation settlement during the third quarter of fiscal 2015.
  • Loss on extinguishment of debt - a loss related to certain private repurchases conducted with several holders of Ciena's 0.875% convertible senior notes, due June 15, 2017.
  • Non-cash expense associated with the conversion of convertible notes - a non-cash expense related to certain private exchange offers conducted with several holders of Ciena's 4.0% senior convertible notes due March 15, 2015 prior to maturity of such notes.
  • Non-cash interest expense - a non-cash debt discount expense amortized as interest expense during the term of Ciena's 4.0% senior convertible notes due December 15, 2020 relating to the required separate accounting of the equity component of these convertible notes.

Source: Ciena Corporation

Ciena Corporation
Press Contact:
Nicole Anderson, 877-857-7377
pr@ciena.com
or
Investor Contact:
Gregg Lampf, 877-243-6273
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